Discuss the options for a firm who anticipates the near term by wuxiangyu


									    Stratasys and the 3-D Printing Industry
             Management of Technology MGMT 463

                       Alexander Christen
                          Joshua Jessar
                       Courtland Madock
                        Molly McMahon
                     Jonathan Ofori-Amoah

                       December 2, 2009


    Stratasys is the worldwide leading manufacturer and seller of additive fabrication machines

used in 3D printing and product prototyping. Stratasys, which is also the inventor of FDM

(Fused Deposition Modeling) technology, has installed more than 11,000 3D printers and

3D production systems around the world and has annual revenues of more than $120 millioni.

The company operates as 3 divisions:

       Fortus: a high-end line of 3D production systems capable of both prototyping and small-

        scale production of working manufacturing parts

       Dimension Printing: a brand of 3D printers that allows desktop printing of smaller

        functional 3D models primarily for prototyping purposes

       Redeye: a for-hire prototyping and low-volume production service

This discussion will focus on Dimension Printing; an analysis of its strategic priorities over the

next two years, the diffusion of its 3D printing technology, and the company’s competitive

position in the market in order to develop a set of assessments and recommendations

pertaining to Dimensions Printing’s business development strategy.

3D Prototyping & Printing – History

        Before the widespread diffusion of computers and digital image rendering software,

producing a product prototype required many hours of skilled labor and a wide variety of

materials and tools. Architects would spend many months building miniature scale prototypes

of their designs by hand before any full scale material testing was performed. As a result,

commissioning multiple prototype iterations was expensive and time consuming. The average

time between the product concept creation phase and full scale commercial production

averaged between 12-16 months. With the introduction of rapid digital prototyping in the late

1980s, a firm today (depending on the industry and installed manufacturing base) can produce

a product prototype within several hours and ship a commercial product in a matter of weeks.

In fact, research from the Aberdeen Groupii, a business-related research service, found that

manufacturers using digital prototyping build half the number of physical prototypes as the

average manufacturer, get to market 58 days faster than average, and experience 48 percent

lower prototyping costs.

        Digital rapid prototyping is the automated production of physical 3D objects through

additive manufacturing, a process by which successive layers of material – in most cases a liquid

polymer – are applied in order to create a finished prototype. Pioneered by software

companies such as Autodeskiii, Stratasys, and 3D Systems, digital rapid prototyping allows

companies to virtually design and interact with a finished product before it has been

manufactured. As a result, companies can troubleshoot a product’s design flaws before

spending valuable time and money in creating multiple physical prototype iterations before a

final validation.

        Traditional additive fabrication systems use a stereolithographic (SLA) method: a vat of

UV-curable liquid resin and a highly sensitive laser to sculpt. This involves a long wait time and

the use of highly toxic chemicals, which are costly to procure and expensive to dispose of. In

contrast, 3D printing can apply several different technologies, including inkjet printing or fused

deposition modeling (FDM), developed by Stratasys. An inkjet system uses layers of a fine

powder—usually resin or corn starch-based—bonded together by an adhesive released by the

inkjet print head. As each cross-section of the 3D representation is formed, a UV flood lamp

mounted on the print head cures each layer. FDM uses a nozzle to deposit layers of molten

polymer to create a design based off a digital rendering. A plastic filament or metal wire is

unwound from a coil and supplies material to the nozzle, which in turn regulates polymer flow.

The nozzle is heated to melt the polymer and can be moved in both horizontal and vertical

directions based on directions from computer-aided design (CAD) software.

       Compared to traditional stereolithographic methods, 3D printing systems are less

expensive and produce results faster. 3D printing is also rapidly becoming a dominant

technology that offers firms a faster, easier, and more affordable means to print parts and

assemblies made of several materials with different mechanical and physical properties. While

Inkjet systems provide fast production times and native full-color printing, FDM systems are

also quite fast, and the FDM printing system and polymer materials are less costly than the

inkjet system and resin powders.

       Standard applications of 3D printing include industrial design visualization, prototyping,

metal casting, and architectural design. As the technology’s adoption increases, it is possible

that 3D printing will find widespread use in the education, geospatial, healthcare,

entertainment/retail, automotive, aerospace, dental, and biotech areas. For example,

variations of 3D printing technology are currently being studied by biotech firms in the use of

tissue engineering applications where organs and body parts are built using inkjet techniques.

Layers of living cells are deposited onto a gel medium and slowly built up to form fully-

functional 3D structuresiv. In addition, paleontologists are using 3D printing to reconstruct

fossils, archaeologists are replicating historical artifacts, and forensic pathologists are

reconstructing bones and body parts found heavily damaged at crime scenes.

3-D Printing/Prototyping Technology Market

       The overall market for 3-D Printing/Prototyping is still in an early stage of growth and is

expected to reach USD$782.6 million per year in 2013v. Ten years ago these 3D printers could

cost in excess of $120,000 and were used primarily by major companies like Boeing for quickly

testing prototypes. Today, entry-level models can be found for under $10,000, making them far

more affordable for a wide-range of business applications. The competition has been limited

thus far to a handful of major players, including 3D Systems, Solidscape, Stratasys, and Z Corp.

However, major technology players like Cannon, HP, and Xerox are getting involved through

their own research and development efforts.

Potential Segments

       The increase of 3-D printers in the market is due in part to the recent drop in equipment

prices (led by Stratasys), and an increasing number of applications that can see the benefit of

short-term, highly customized manufacturing. In addition, the 3D printer has begun to diffuse

into the homes of innovators using it for home or hobby use.

       The segment furthest along the adoption cycle is that of firms requiring product

prototyping, which the Dimension division primarily targets. Chicago-based product design firm

Design Integrityvi falls into this category. Currently, Design Integrity sends its CAD drawings to

local prototyping shops. Brian Conti, a sales engineer at Design Integrity, notes,

       Every year, we evaluate the costs and benefits of acquiring a 3D printer. It has never made more sense

       than this year. In addition to cost savings, the benefit of providing our customers with several iterations

       of prototypes is extremely valuable. Right now we are limited in the number of versions of prototypes we
       can produce because the cost of outsourcing is high.

Design Integrity’s typical product development process today:

Product development process for a company with a 3D printer on site:

       Stratasys also has opportunities in digital manufacturing applications for larger

companies. Says CEO Scott Crump:

       We're committed to developing the market for direct digital manufacturing applications. These

       applications are providing incremental sales opportunities for our Fortus 3D Production Systems [another

       line of 3D additive technology made by Stratasys]. We are optimistic about this emerging market's

       These larger systems produce prototypes on a larger scale, and can actually even

produce end-use products on a small custom scale. This segment could ultimately represent a

large market, but for now is less prevalent than small-scale prototyping usage.


       Stratasys has also seen additional opportunities for diffusion into the market for

personal 3D printing, particularly after its latest product, the uPrint personal printer, was

featured in Jay Leno’s Garage, his regular column in Popular Mechanics. Leno praises the ability

of the 3D printer to create a hard-to-find automotive part he needs.

                Let’s say you have an older Cadillac or a Packard, and you can’t get one of those beautifully

       ornate door handles. You could go to the big swap meet in Hershey, Pa., every day for the rest of your life

       and never find it. Or you could take the one on the left side of your car, copy it, use the computer to

       reverse it, and put that new part on the other side… These machines are not suited for mass production,

       but they work well for rapid prototyping. Just as eBay has made many swap meets go away, this machine
       could eliminate the need to go to eBay for parts.

       Notable figures like Jay Leno have become powerful innovators in the 3D printing

market, especially when they evangelize on the benefits of this growing technology. He makes a

particularly great innovator for Dimension since he’s not an engineer himself–just a car

enthusiast. He has demonstrated that the world of personal printing is available to anyone with

a budget of $15,000.
        A competing new product in the personal market, which serves to expand the market

overall, is open-source 3D printers. Low-cost open-source 3D printers (often called “fabbing

systems”) such as Fab at Home have encouraged experimentation among hobbyists. Early users

have reported printing with everything from food (i.e. chocolate) to epoxy. Typically the Fab at

Home kits cost upwards of $2000.x These kits are not for the faint of heart, however, and will

likely be more attractive to technology enthusiasts, not unlike the market for early kit

computers. For now, 3D printers are not far along the adoption curve for personal use.


        As the Dimension division is focused on the lower-priced end of the 3D markets most

likely to see near-term diffusion, we will focus on the strategies available to it in anticipation of

this diffusion.

Industry Forces Analysis

        To understand the options available to Dimension, it’s useful to review the forces

currently shaping the industry. Rivalry among competitors is high as each fight to capitalize on

the forecasted growth brought about by the reduction of prohibitive cost barriers, and to

establish an industry standard. The only substitute for 3D printing is outsourcing to service

providers such as prototyping shops, which can be expensive. Many traditional printer

companies are investing to explore this space and could be candidates to enter into the market.

However, patents held by existing players such as Stratasys would pose barriers to entry.

Stratasys alone is the owner of over 180 patents, and has an additional 70 pending. Suppliers

have an average amount of power in this market. As the technology inputs required are fairly

specific, the cost of switching suppliers is high. However, there are many suppliers in the space

that may be willing to create the required inputs if necessary, and thus switching costs may be

reduced in the near-term. Finally, buyer power in this market is generally high. The few players

that due exist in the market are fighting over a large number of potential consumers, from

design shops to individual consumers. Overall, the market for 3-D printing is in a transitional

phase state with intense competition and could be attractive for competitors if they are able to

overcome patent protection.

       Several challenges will have to be addressed by the market in order for more

widespread adoption of the technology to occur. Quality and price issues will have to be

overcome by the market in order to increase the rate of diffusion of the technology. Recently,

there have been improvements in quality and decreasing prices which have increased the

opportunity for those who are in the early majority phase and may have found the costs too

high. Technological advances and increasing sales will create economies of scale for the

manufacturers and will continue to drive down 3D printer prices. The costs of materials the

printers need to create the prototypes will go down as their use increases and competitive

pressures force the costs to drop.

Dimension 3D Printer Market Position

       Dimension Printing is the largest product segment of Stratasys Corporation’s 3D printing

products, focused squarely on lower cost printers used for prototyping purposes. Dimension

was the first manufacturer to introduce a 3D printer for under $30,000, and is currently the #1

seller of 3D printers. According to the 2006 Wohler Associates report (an analysis of the

worldwide additive manufacturing industry), Dimension became the first company to ship more

than 1,000 3D printers in one yearxi and had acquired more than 50% of the 3d Printer market

worldwidexii. Most recently Dimension has introduced the uPrint printer, a desktop-sized

printer available for under $15,000. While Dimension still maintains its number one ranking in

the market, the competitive factors cited previously pose a threat to its long-term


Dimension’s Product Line

       Dimension’s products are differentiated from one another based on characteristics such

as size, level of printing detail, layer thickness, model material used, and supporting material

used. Currently, Dimension offers 4 types of 3d Printersxiii:

       1200es Series – The largest of Dimension’s printers, the 1200es series is a free-standing

device standing 45 inches tall and weighs 326 lbs, and has no special facility requirements. The

printer is capable of producing models of up to 10” x 10” x 12” in size. Models fabricated in the

1200es are ready for use immediately; they need not “cure” before they can be drilled, tapped,

sanded, and painted. The 1200es Series comes in 2 models. The first is the SST (Soluble

Support Technology) class, which dissolves model supports in a water-based solution, making it

ideal for detailed and/or delicate models. The BST (breakaway support technology) class allows

supports to be snapped off the completed model and is recommended on less detailed models

or in applications when water supplies may not be available. The BST 1200es Series starts at

$18,900 Dollars and the SST 1200es starts and $32,900.xiv

       Elite – The Dimension Elite printer also a free-standing device capable of producing

finely detailed models of up to 8” x 8” x 12” in size. Models fabricated in the Elite printer all use

water-soluble supports, and are immediately ready for use after printing. The printer is

intended for use in an office environment. The Elite printer starts at $29,000.

       uPrint – Introduced by Dimension in January 2009, the uPrint has been billed as the

world’s first personal 3d printer. At approx 28 square inches and 168 lbs, it is compact enough

to fit on a desktop while offering the many of the same features as much larger printers. The

uPrint produces models of up to 8” x 6” x 6” in size using the SST technology xv. The uPrint starts

at $14,900.

Customers & Sales Channels

       Dimension’s customers include large to small companies who are in the business of

manufacturing primary or supporting products, tools, and devices. Nokia, Honda, Duracell,

Harley Davidson, Black and Decker, Bose, Chrysler, and Segway are all users of Dimension 3D

Printers. Dimension 3D Printers have a broad range of benefits for Product Designers,

Engineers, Educators, and Architects. Dimension printers are available through a global

network of resellers and distributors. Until 2009, there were no resellers of Dimension

products which also sold Stratasys’s Fortus product line. Along with the printers, customers

purchase a site license for the Catalyst EX software which includes free upgrades during the

warranty period.

       In 2006, Dimension announced that it opened a new office in Shanghai, China, and 7

new reseller agreements with Chinese-based partners and continues to expand globally.xvi

What is the Optimal Strategy for Dimension?

       Given the industry structure, Dimension’s current position, and its product mix and

capabilities, what should its strategy be, particularly over the next two years?

       First, among the various uses for 3D printer products, Dimension must decide whether

to focus on a few or try to support many. Currently, Dimension is targeting a number of end

users who may or may not have similar prototyping needs. Its web site includes separate pages

describing value propositions for Product Designers, Design Engineers, Production Engineers,

Educators, and Architects, which each requires different messaging. The benefits of this

strategy are that it allows Dimension to reach a diverse market that may appreciate the product

in different ways and applications. However, the primary drawback is the stress it puts on

distribution channel support and the confusion it can introduce in marketing. As more

disparate user types are added, use cases multiply and existing resources of both a technical

and non-technical nature are stretched in the attempt to appeal to parties with different needs

reached through different channels and means. Going forward, it is likely that each user group

will react differently to different aspects of the products, differing price points, etc. We expect

that Dimension may benefit from reducing the scope of its target market; say, particularly to

educators and product designers. Such focus would greatly reduce any confusion in marketing

strategy, and allow for deeper penetration into these markets with new and existing products.

       With the technology Dimension currently possesses, it could choose to exclusively

distribute its technology, thereby limiting its reach but protecting the firm’s share of whatever

profits are to be had. Alternatively, it could attempt to accelerate the adoption of the

technology across a variety of segments (some of which it currently may not even envision) by

licensing it to other manufacturers or partners. In this case, it would not have exclusive rights

to the returns, but might ultimately profit from a greater market size. With a number of

competing firms and competing technologies already in the space, Dimension might find its

licensing options limited. Still, a partnership with a large-scale traditional printing firm could be

worth exploring as a way to jump-start wide-scale adoption of the technology. This would have

the added benefit of heading off the entrance of a potentially powerful competitor, and could

go a long way towards encouraging the adoption of its proprietary technology as the 3D

printing standard.

       Meanwhile, Dimension can improve its reach and loyalty within its target segments by

providing additional services such as consulting, training, and support. Charging separately for

such services or bundling them with different types of end-user licenses could also provide

additional sources of revenue from the existing market before growing into others. The

enhanced levels of support will also provide increased access to customers, which can be vital

when collecting research on how best to improve and deliver new products and features.

Dimension could offer such services through its dealer network, or supply them itself.

        Dimension’s marketing strategy should focus on channels that are most relevant to the

target market, such as the Internet, trade journals and magazines, and through conventions or

dealer-specific literature. In order to reach the early majority of users, Dimension should focus

its messaging on how its products are of professional quality and high affordability. Reference

clients will also be very useful.

        Dimension technology is currently limited in printing objects made from ABS

thermoplastics, which have a wide variety of uses but are not suitable for every possible use of

3D printing, such as the potentially very lucrative growth of organs. At this time, many

competing technologies such as this are still unproven, but their market potential is quite

substantial. Dimension must measure the benefits of pursuing additional technologies vs. the

costs, which would include the opportunity costs associated with neglecting its core

technologies as well as the diversion of resources from efforts to encourage the diffusion of its

current technology. In the near term Dimension would be best served by continuing to focus its

resources on this diffusion, but with a watchful eye toward developments in the space.

        Dimension should also continue to encourage the overall growth of the 3D printer

industry in order to increase the size of the pie from which their market share is taken. For

example, dimension has sponsored the 3D Extreme Redesign Challenge which is open to high-

school and college age students and awards scholarships for winning design submissions. In

2008, Dimension also granted more than $400,000 to schools to underwrite the purchase of 3D

printing systems in collaboration with Project Lead the Way.xvii The stated goal of this program

is to help encourage future generations of engineers, designers, and architects to experience

the benefits of 3D printing technology; a benefit they will hopefully recall as they move into

positions where they can influence the purchase decisions of their employers. While it provides

good publicity for the company, Dimension must be wary not to over-invest in this area, or it

may risk financing the market growth of future and existing competitors.

         Dimension could also consider a partnership with Kinkos, OfficeMax, or Best Buy in

order to target the mainstream consumer segment. Dimension could hold demonstration

sessions in these stores to raise brand awareness and display its product’s capabilities. Should

interest and in-store purchasing prove attractive, Dimension would train their partner’s

technical specialists on how to maintain, trouble-shoot, and service customer’s 3D printing



         This discussion has presented an analysis of which strategic priorities Dimension must

consider and has outlined a concrete set of recommendations. In the ever-evolving

technological landscape, the key challenge and opportunity Dimension faces is what value does

3D printing technology present to the consumer, and just as importantly, at what price point.

In the next 24 months, Dimension Printing will have to decide which diffusion and distribution

strategies fully leverage the technological value proposition presented by 3D printing over the

next five years.


Exhibit 1: Dimension Product Line (2009)

Exhibit 2: Dimension Printer Product Comparisonxviii

        Exhibit 3: Comparison of 3 major 3D Printing Brands
                                                     xix                                     xx
                 Stratasys/Dimension           Z Corp                             3D Systems
Technology       Fused Deposition Modeling     Three Dimensional Printing         Stereo-lithography (SLA)
Materials        ABS plastic                   Choice of polymer or plaster       Acrylics
                 Extremely durable, good for   powder
                 rigorous handling             Good for customer
                                               presentations –full color and
Material cost    $150/pound                    $1.50-$2.00/cubic inch             $100/pound
Speed            Slow                          Fast                               Average
Accuracy         Average                       Average                            Very good
Strength         Price and materials           Price and full color               Accuracy and finish
Weakness         Speed                         Limited materials, fragile parts   Fragile parts
Price range      $40k-800k                     $20k-70k                           $15k-300k
Etc.             Industry leader               2 major player                     Pioneered rapid
                                                                                  prototyping in mid 80s.

Appendix A:

FDM 3D Printing Model

      1. nozzle ejecting molten polymer

      2. deposited material

      3. controlled movable table

Appendix B:

A typical stereolithographic machine.

Appendix C:

Source: http://en.wikipedia.org/wiki/3D_printing

                                     History of Printing
                       Woodblock printing                  200
                       Movable type                        1040
                       Intaglio                            1430
                       Printing press                      1454
                       Lithography                         1796
                       Chromolithography                   1837
                       Rotary press                        1843
                       Flexography                         1873
                       Mimeograph                          1876
                       Hot metal typesetting               1886
                       Offset press                        1903
                       Screen-printing                     1907
                       Dye-sublimation                     1957
                       Phototypesetting                    1960s
                       Photocopier                         1960s
                       Pad printing                        1960s
                       Dot matrix printer                  1964
                       Laser printer                       1969
                       Thermal printer                     1970s
                       Inkjet printer                      1976
                       3D printing                         1986
                       Stereolithography                   1986
                       Digital press                       1993

   Stratasys website: http://www.stratasys.com/
    Aberdeen Group Research Library: http://www.aberdeen.com/access/access_research.asp
    Autodesk website: http://usa.autodesk.com/adsk/servlet/index?siteID=123112&id=331041
    Inderscience. "3D Printing For New Tissues And Organs." ScienceDaily 18 June 2009. 23 November
http://www.sciencedaily.com /releases/2009/06/090618085752.htm
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Stereolithography, Fused Deposition Modeling, Selective Laser Sintering and Inkjet Technologies.”
October 2009. http://www.abiresearch.com/research/1002837-3D+Printing
    Design Integrity website: http://www.designintegrity.com/
     Conti, Brian. Personal Interview. November 1, 2009.
     Smock, Doug. “It’s a Buyers’ Market for 3D Printers.” Design News. 18 May 2009.
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    Ward, Logan. “Fab at Home, Open-Source 3D Printer, Lets Users Make Anything.” Popular Mechanics.
November 2007.
     “Dimension 3D Printing Group Accounts for More Than 50 percent of 2006 3D Printer Sales.” Business
Wire. 8 May 2007. http://www.allbusiness.com/services/business-services/4341275-1.html
     Dimension Printing website. http://www.dimensionprinting.com/3d-printers/3d-printing-main.aspx
     Dimension Printing website. http://www.dimensionprinting.com/3d-printers/printing-
     3DVision Technologies website.
    “Dimension 3D Printing Group Opens Office in Mainland China; Announces Reseller Agreements with
Seven New China-Based Partners.” Business Wire. June 2006.
     Dimension Printing website. http://www.dimensionprinting.com/company/company-main.aspx
      Dimension Printing website. http://www.dimensionprinting.com/3d-printers/3d-printing-
     Wohlers, Terry. “Factors to Consider When Choosing a 3D Printer.” Time-Compression Technologies.
November/December 2005. http://wohlersassociates.com/NovDec05TCT3dp.htm
     3D Systems website. http://www.3dsystems.com/


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